Servicing Guide

Published June 10, 2020

The Servicing Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Servicing Guide in PDF format.

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C-2.3-01: Processing ARM Conversions to Fixed Rate Mortgage Loans (05/15/2019)

This topic provides requirements for processing ARM loan conversions to fixed rate mortgage loans.

The servicer must also follow the procedures in F-1-01, Servicing ARM Loans in order to complete the conversion of an ARM loan to a fixed rate mortgage loan.

This topic contains the following:


Determining Eligibility Criteria for Converting a First Lien ARM to a Fixed Rate Mortgage Loan

To be eligible for conversion to a fixed rate mortgage loan, the servicer must confirm that an ARM loan

  • is current (or must be brought current by the conversion date),

  • has an LTV ratio of 95% or less, and

  • satisfies any other conditions specified under a negotiated contract.

If the mortgage loan has negatively amortized, the servicer must obtain a new appraisal to determine

  • the current LTV of the property, and

  • whether the borrower will have to pay any funds to reduce the UPB to the amount required to achieve an LTV ratio equal to 95% of the current value of the property.


Completing the Conversion

The following table provides a list of all items required before the servicer can complete the conversion of an ARM to a fixed rate mortgage loan.

The servicer must have...

Received any required appraisal report.

Received from the borrower

  • any amount required to reduce the UPB, if applicable;

  • any other items as specified in a negotiated contract; and

  • a signed agreement acknowledging the changes to the mortgage note necessary to provide for the new fixed interest rate.

Sent a document custodian the original agreement, if Fannie Mae is holding the original note as a custody document.

Performed any other actions as specified in the negotiated contract.

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